NC Property & Casualty cheat sheet

Risk is uncertainty about loss; insurance transfers that uncertainty to an insurer in exchange for premium and pools many similar exposure units.

Law of large numbers: as the number of similar independent exposure units grows, actual losses converge on expected losses, making future losses more predictable.

Insurable risk traits: loss is definite and measurable, accidental, calculable, spread over many similar units, and not catastrophic to the insurer.

Insurable interest in property must exist at the time of loss; in life insurance it must exist at policy inception.

Principle of indemnity restores the insured to approximately the pre-loss financial position; valued policies and replacement cost are exceptions.

Utmost good faith imposes duties on both parties: accurate representations, no concealment, no fraud, and honesty in presenting material facts.

Contract characteristics: contract of adhesion (insurer drafts), unilateral (only insurer makes a legally enforceable promise), conditional, aleatory, and personal.

Subrogation lets the insurer, after paying a loss, stand in the insured's place against the negligent third party; salvage is the insurer's right to recover damaged property.

Coinsurance settlement formula: (amount of insurance carried / amount required) x loss, then subtract the deductible.

The Commissioner of Insurance is elected statewide for a four-year term, heads the NC Department of Insurance, and approves rates and policy forms.

The North Carolina Rate Bureau collects loss data and files rates and forms for member property and casualty insurers; the Commissioner may approve, modify, or disapprove filings.

Residual property market: the NC Insurance Underwriting Association administers the Coastal Property Insurance Pool (wind and hail) and the FAIR plan for urban property.

Residual auto market: the NC Reinsurance Facility reinsures private passenger auto liability and physical damage risks that insurers would otherwise decline.

North Carolina minimum private passenger auto liability limits are 30/60/25: $30,000 per person, $60,000 per accident bodily injury, and $25,000 property damage.

Uninsured motorist coverage must be provided in North Carolina at limits equal to the policy's liability limits, and it also applies to underinsured drivers.

The Safe Driver Incentive Plan assigns points for traffic convictions and at-fault accidents, increasing auto premiums; clean records earn safe driver discounts.

Cancellation and nonrenewal require advance written notice to the insured: generally 10 days for nonpayment of premium and 30 days for other reasons.

Producers hold premium funds in a fiduciary capacity, must not commingle them with personal funds, and must be appointed by the insurer they represent.

Unfair trade practices prohibited by statute include rebating, twisting, misrepresentation, false advertising, and Boycotts or coercion; penalties include fines and license suspension.

Homeowners HO-3 coverages: A dwelling, B other structures, C personal property, D loss of use, E personal liability, F medical payments to others.

Replacement cost condition: the dwelling must be insured for at least 80% of full replacement cost or a loss is settled on a reduced, proportionally depreciated basis.

Coverage C special limits include about $200 for money, $1,500 for theft of jewelry and furs, and $2,500 for theft of silverware and goldware.

Common property exclusions: earth movement, flood, ordinance or law, neglect, intentional loss, war, nuclear hazard, and business pursuits.

Loss of use pays additional living expenses and fair rental value for the reasonable time needed to repair or replace the damaged residence.

Dwelling forms: DP-1 basic broad named perils with actual cash value settlement, DP-2 broad named perils, DP-3 special (open peril) with replacement cost.

Actual cash value = replacement cost minus depreciation; replacement cost value pays repair or replacement without deducting depreciation.

Flood coverage is written separately through the NFIP or private markets, has separate building and contents limits, and generally carries a 30-day waiting period.

Deductibles apply per occurrence; percentage wind and hail deductibles apply to coastal properties and are calculated on the Coverage A limit.

Personal auto policy parts: A liability, B medical payments, C uninsured/underinsured motorists, D collision and other than collision, E duties after loss, F general provisions.

Split limits state three numbers (for example 30/60/25); a combined single limit states one total amount per accident for all bodily injury and property damage.

Negligence elements: duty owed, breach of duty, proximate cause, and actual damages; all four must be proven by the claimant.

Damages: special damages are economic (medical bills, lost wages), general damages are non-economic (pain and suffering), and punitive damages punish intentional or reckless conduct.

Liability theories include negligence, strict or absolute liability, vicarious liability, and contractual liability.

Homeowners Section II: Coverage E personal liability and Coverage F medical payments to others, which pays regardless of fault and excludes resident insureds.

North Carolina is a contributory negligence state, so a claimant whose own negligence contributed to the injury is barred from recovery.

Uninsured motorist coverage responds to hit-and-run and uninsured drivers; underinsured motorist coverage responds when the at-fault driver's limits are insufficient.

A personal umbrella policy provides excess liability over auto and homeowners limits after the underlying limits or a self-insured retention are exhausted.

Building and personal property coverage form insures the building, business personal property, and personal property of others at the described premises.

Coinsurance formula: (limit carried / limit required) x loss, minus the deductible; agreed value suspends the coinsurance requirement.

Causes of loss forms: basic (named perils), broad (named perils plus falling objects, water damage, and similar), and special (open peril, subject to exclusions).

Business income covers lost net income plus continuing normal operating expenses during the period of restoration; extra expense covers costs to resume operations quickly.

Civil authority coverage begins after a 72-hour waiting period when access to the premises is prohibited by government order because of damage nearby.

Blanket insurance applies one limit to multiple locations or property types; specific insurance applies a separate limit to each item.

The vacancy provision reduces losses and suspends certain coverages when a building has been vacant beyond 60 consecutive days.

Ordinance or law coverage pays for the undamaged portion that must be demolished, demolition costs, and increased cost of construction required by current codes.

Reporting forms require periodic premium deposits based on reported values, followed by a premium audit at expiration.

CGL coverages: A bodily injury and property damage, B personal and advertising injury, C medical payments; written on occurrence or claims-made forms.

CGL limits include each occurrence, general aggregate, products-completed operations aggregate, damage to premises rented, and a medical expense limit.

Claims-made policies use a retroactive date and an extended reporting period; the occurrence form covers injury that happens during the policy period regardless of when claimed.

Products-completed operations covers injury or damage away from the premises arising from the insured's product or completed work.

Fire legal liability covers fire damage to rented premises under a separate limit; it does not cover the insured's own property.

An additional insured is granted coverage under the policy by endorsement; a certificate of insurance merely evidences coverage and does not amend the policy.

Business auto symbols designate covered autos; hired auto and non-owned auto liability extend coverage to rented and employee-owned vehicles used for business.

Workers compensation: Part One pays statutory benefits regardless of fault, Part Two provides employer's liability, and Part Three covers other states.

The exclusive remedy doctrine makes statutory workers compensation the employee's sole remedy against the employer for workplace injury.